tv Whatd You Miss Bloomberg August 12, 2015 4:00pm-4:31pm EDT
scarlet: u.s. stocks rebounding. not in the positive after opening for losses. "what'd you miss." will the rise of a left-wing party make britain the new greece? joe: joining us live from london. scartlet: we begin with the markets. all three indexes have finished closed. stocks rebounding. china concern eases. the dow touching a low before
recovering. at one point it was down 277 points. this will be the biggest reversal since may of 2012. joe: it was an extraordinary day. yen weakened further. s&p futures fell the area european shares got slammed. then of course u.s. stocks down big. a stunning afternoon recovery. scartlet: you don't always see that. joe: i want to go in my terminal. commodities. we have a chart of soybeans and corn. the white is corn. i should have switched that around. at 12:00 we got usaa report. both of those plundering.
it is a world commodity story. every commodities seems to be there is more supply. corn and soy, everywhere you look we are swimming in commodities. scartlet: there is too much of everything. low oil prices. joe: the downside of the super cycle is upon us. scartlet: look at a divergence between u.s. equities and credit. the red line is corporate bonds. the two moved in a similar pattern basically last saturn through this spring. starting in march they moved in different directions. spreads have widened. debtthe effects of the problems. it has been modest in terms of movement overall. you have an upward swing today.
will the market shrug things off like it did in july or is this the beginning of the end of the divergence? joe: this is a big story. everyone is wondering which way it will result. i want to bring in our guest to his joining us from london, a k. house ofhe u. lords. the big story in world markets in the world economy are the moves china is making. is china making the right moves? is china a poster child for when someone tries to control the economy too hard? scartlet: people are talking about -- >> guest: people have been talking about the possibility of currency war. we may be seeing a reality. the problem with china, its export growth model is busted.
that relied on current seeing depreciation and pricing of currency being too low. they can't keep that up forever. they've got to find a new growth model. theses what lies behind currency swings. scartlet: i want to go there. tona is trying to transition one that is more domestic demand driven. does it have mechanisms in place to make that transition to an economy more market-driven and open to international participation within its command economy structure? guest: no. it's got to gradually dismantle it. down.ularly to slow
toryone agrees it has got rebalance towards consumption but that is difficult given the structure of the chinese economy and the interim solution is to rebalance towards eurasia. that is the meaning of the new silk road policy which it has concocted in the last two or three months. it has become more and more public. that it hopes to do in conjunction with russia. scartlet: we have a quote from one of your essays about that china open -- china russia marriage. the growth model is running out of steam. the company by protectionism and sentiment, re-our terrain -- does that reinforce the marriage of convenience?
>> the chinese don't think in terms of second by second fluctuations of the market. one of the things about china is their leaders are very old. that is a principle of chinese policy. you take long views. they think of this as a 50-year-old program. i don't think they are going to be too worried about day-to-day fluctuations. volatility does suggest they have to start moving. joe: any last couple days since the turmoil, we have seen the fed hike rate diminished. when you look at the global economy do you think the fed should be in an urgency to get on with the cycle or should that way?
guest: it depends on your view of what is going to happen to inflation. the central banks have inflation targets and they are meant to move interest rates in line with what they expect the inflation to be over the medium-term. re are strong they' inflation pressures anywhere. the pressures or rather the other way around. i don't really seeing there is a great pressure to raise rates. i don't think it in economic of policy rates is the right thing to do just now. joe: we now have breaking news. scartlet: we have cisco numbers here. beating estimates. the consensus was for $.56. revenue rose 4% which was higher
. they were anticipating a 2% increase. the forecast is in line with what analysts were looking for on average, a consensus was what was anticipated. higher than what analysts had been looking for. cisco shares moving higher in the premarket in response. coming up, we have a chart you ebt.t miss, corporate d ♪
you about a chart on how corporate debt is affected by the fed. 2013 fundsfter flowed into sovereigns. they turned into the outflows. for an money is going into emerging market corporate. you wonder if the trend will reverse. joe: with the dollar strengthening there will be concerns about debt service payments. let's get to the top headlines this afternoon. alibaba planning a stock buyback to prop up its share price. the stock traded lower after sales missed targets. the transaction volumes disappointed analysts. alibaba blaming the chinese slowing economy. heinz announced the elimination of jobs in north
america, 5% of the combined workforce. the merger was driven by berkshire hathaway and 3-d capital of brazil. scartlet: another one step forward, one step backward in the grease debt crisis. there is a technical agreement on the bailout. germany's government withholding approval of the plan. the payment to the ecb is due in just a few days per those are your top headlines. i want to bring back in lord robert who wrote about greece. the termaim at confidence fairy. you said austerity does not work. asserting that the confidence fairy does not change the logic of the policy. it it's here's the logic for a time. recovery may come about but never because of it. ofen that, you are a credit
-- critic of austerity. and what germany is doing wrong. guest: i think what they are doing wrong is they are forcing the greek economy into greater and greater depression as the price for getting the bailout. greece will get more money. it will be able to go on paying interest on its debt but at the cost of driving the economy into greater recession. that is a self-defeating circle. the greek economy has fallen by 25% in the last five years. it is projected to go and get smaller by 5% this year. they are cutting off the real of servicing the debt.
has your forgotten the lessons of post-world war ii? people talking about germany and the fact that they were supposed to get debt relief and that helped to and that should have applied to greece as well? what is the historical lesson here? guest: the historical lesson, the settlement between debtors and creditors has always got to be negotiated. they are creditor responsibilities, and the creditors can't expect to be ofd by granting the economy the debtors into dust. what we haven't had enough of in this negotiation is the , itgnition by the creditor has to play a big part in the adjustment of the greek debt. it doesn't understand
that, not only is great not going to recover but europe is it going to recover and it will hit germany as well. isrtlet: jeremy corbin resuscitating or destroying the labour party depending on your perspective. he is polling well. be good forcorbin the u.k. economy? , i think there are two questions on whether he would be good for the labour party, and whether he would be good for the economy. people say he is almost a communist. there is one sensible thing he is saying, which ought to be taken fairly seriously. which is about the monetary financing of an investment program. one reason or another, if you
can't do that through orthodox monetary policy or fiscal policy, why not borrow for the the bank? fund an investment program? it can only be the case under special circumstances. it would have to be in deflationary circumstances. the idea that this is mad because it will lead to runaway inflation is wrong under the circumstances. it is something worth considering. that bit is anti-austerity, hat as reasonable credentials behind people haveown backed it and not to be considered, and not written off as a recent of this -- rescinded this version of socialism. has proposed this idea
of qe. aggressive monetary financing of investment. the bank of england creating money to invest. is that a proposal you believe can be supported? guest: i don't know. i don't think he would have rejected it out of hand. he would have given it serious concern. and which can issue bonds for a particular project. that would be one possible way of doing it. behind it is not so much how you finance it but trying to get an investment program going at a time where there is large .urplus of savings about w worried are you
brexit? how do you feel about it? guest: it can't be ruled out. last two or three years, since the crisis started, the european union hasn't covered itself in glory. i think the eurozone itself has been pretty much a disaster. that means there is a lot of anti-eu mood in britain. --h the rise of you can't ukip and the turbulence on the continent of europe there will be an anti-european sentiment. i don't roll out a referendum going against staying in the eu.
could you explain why this is something we should support? guest: first of all, why even think of it? it is how you deal with a challenge of disappearing jobs. if you think that robots and automated systems are going to make deeper and deeper inroads in the human work, you have to start thinking not so much of replacement jobs as replacement income. is an income not tied to the job market, seems to be the logical way forward. work is going to be a diminishing part of people's lives in the next 20 or 30 years. the diminishing part of their identity. you have to create some
opportunity for them to reshape their pattern of living. that is the basic idea behind it. [indiscernible] wage be?ld living how would you quantify the living income in the developed economy? guest: there are basic measures for what is called the living wage, or living income. about half of median income. standard.e accepted .hat is where you need to start this is a long-term thing. for many years to come, most people's lives are going to be defined by work. there are studies that are are at up to 50% of jobs
risk over the next 20 years. we going to find enough replacement jobs for the jobs that automation and robotics are threatening? i don't know what the answer to that is. we ought to be thinking about it, thinking about what the human race in developed countries is going to do when jobs are less important part of their lives. joe: let's look big picture. what policy makers are doing. be the biggest disappointment by how policymakers are addressing the economy? guest: he would have been disappointed at two things. lack of precautions taken against the possibility of a huge financial crash which happened in 2008, 2009.
secondly, lack of buoyant response to that crash. the recovery is being slow. we have been in a state of stagnation and the recovery is still very weak in the european union. the actual recovery measures we have taken, quantitative easing, have skewed towards asset buying and real estate. threatening to get and re-create the circumstances that have led to the crash in the first place. you would have been disappointed by those policy failures. joe: what is the number one issue that keeps you up at night? guest: i don't think i worry too much about the world economy. well with them. what keeps me up is worrying about the things i would do and
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